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The next question has two parts. Part I: Consider a Cournot game among sellers of homogeneous products. Assume that demand is p = 71 - 8Q, that each seller has a cost function C(q) = q, and that the cost of entering the market is K = 5. How many firms would profitably enter the market? [Remark: n should be an integer number, so write your answer as an integer number rounding down; e.g. 5.8 firms rounds to 5 firms.] Part II: Suppose now that the social planner decides how many firms will receive a license to produce. Assuming that the social planner is interested in maximizing consumer surplus minus entry costs, how many licenses n would the social planner give?

          The next question has two parts.

Part I: Consider a Cournot game among sellers of homogeneous products. Assume that demand is p = 71 - 8Q, that each seller has a cost function C(q) = q, and that the cost of entering the market is K = 5. How many firms would profitably enter the market? [Remark: n should be an integer number, so write your answer as an integer number rounding down; e.g. 5.8 firms rounds to 5 firms.]

Part II: Suppose now that the social planner decides how many firms will receive a license to produce. Assuming that the social planner is interested in maximizing consumer surplus minus entry costs, how many licenses n would the social planner give?

Added by Victoria C.

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